1. The timings of the Second Reading of the Finance
(No. 4) Bill and the Committee of the Whole House stage are highly
unsatisfactory. While we recognise that there are exceptional
circumstances this year, the new pattern of Prorogation and State
Opening risks making the timing of the stages of future Finance
Bills tighter than in the recent past. We therefore recommend
that the Treasury and the Business Managers work together to plan
the timings of future Budgets and Finance Bills so that the House
has longer between publication of the Bill and Second Reading
and, particularly, between Second Reading and Committee of the
Whole House. This may require the Budget to be somewhat earlier
in future. (Paragraph 2)

The Government is committed to ensuring there is
adequate time for Parliament to scrutinise the finance bill. And
as well as allowing sufficient time for the finance bill to be
discussed in Parliament, the Government assists in more extensive
scrutiny of measures by publishing draft legislation at least
three months before the bill and producing Tax Information &
Impact Notes (TIINs) on each measure. This is part of the Government's
commitment to the new policy making process, which has resulted
in significantly greater transparency about the impact of policies
and a greater understanding of their consequences.

Macroeconomy

2. We welcome the OBR's use of scenario analysis
to further its understanding of the major risks to the UK economy.
The Treasury Committee recommends that the OBR consider a wider
range of risks and associated scenarios in subsequent forecasts.
Such examination might include ranking the risks by both likelihood
and significance to the UK economy. The examination should also
include an explanation of the extent to which the fan charts provided
by the OBR reflect this information. (Paragraph 16)

The Office of Budget Responsibility (OBR) will write
to the Committee.

3. The OBR now forecasts that the growth in business
investment will be slower than it thought in November 2011. One
of the OBR's explanations for this weakening was the results of
further research undertaken by the OBR into the official ONS figures
on the availability of cash for investment by firms which suggested
that ONS figures over-estimated the amount of cash held by companies
that are likely to invest in capital. We have heard conflicting
evidence on this argument. In view of the importance of business
investment in the GDP forecast, we therefore recommend that the
OBR, in conjunction with the ONS, examine its work in this area
with particular care. (Paragraph 22)

The OBR will write to the Committee.

4. We welcome the Chancellor's commitment to increase
the capacity of the National Loans Guarantee Scheme if it proves
to be successful. We note that oversight of the Scheme through
monitoring and reporting by participating banks, and also an independent
audit, has been put in place to ensure that banks will pass on
the full benefit of lower funding costs to SMEs. We expect there
to be full transparency about the monitoring of the Scheme and
the results of the audit. We will require detailed evidence from
the Treasury to show that these guarantees have had the effect
intended, and that the scheme is operating in such a way that
banks do not retain any benefit, as the Treasury intended. (Paragraph
34)

HM Treasury has designed a monitoring system to be
put in place by the participating banks, which ensures that banks
are able to demonstrate that they are not retaining any of the
benefit of the guarantees. In addition, an auditor will be appointed
in order to give assurance that the data submitted is accurate
and that the systems and compliance checks in place in each participating
bank are functioning and fit-for-purpose. The amount of benefit
accruing to banks from the guarantees can be calculated by HM
Treasury, and can therefore be easily compared to the data submitted
in the course of monitoring.

The Government has already committed to updating
on the progress of the scheme at the Autumn Statement. This update
will be based on data collected in the course of the monitoring
of the scheme as well as on the data collected in the course of
guaranteed issuance and any audits which have, at that point,
been completed. Since the scheme is expected to be open for new
issuance for a period of 2 years, further updates will be published
in due course.

5. We remain concerned that while the Scheme should
reduce the price of loans to some SMEs, and at the margin may
increase the quantity of loans available to them, it was not designed
to solve the problem that many SMEs who may be reasonable credit
risks are unable to access bank funding at all in the current
unusual market conditions. Access to finance for SMEs remains
a significant problem. Whilst these exceptional market conditions
continue, the Government should regularly publish its own estimate
of the degree of dysfunctionality of the market, with proposals
for remedy. (Paragraph 36)

Access to finance for SMEs is affected by a number
of factors, including supply side factors such as bank funding
costs, regulatory changes, the pace of deleveraging and wider
economic trends such as the current Eurozone disturbance. A range
of data is already published in this area including the Bank of
England's lending data, information on market conditions and bank
wholesale funding costs and data on wider economic trends. In
addition, the banks also publish a cross-industry lending data
set and the SME Finance Monitor. The Government's view is that
these sources already provide a good picture of the market and
that it is unnecessary to publish further data.

The Government is already acting in a number of ways
to address the issue of financing for SMEs, including through
the National Loan Guarantee Scheme which reduces the cost of borrowing
for smaller businesses, the Business Finance Partnership (BFP),
which is designed to stimulate non-bank lending channels,
and as stated in the response to the Breedon review, will continue
to examine other routes to improve the conditions faced by British
businesses.

6. We urge the Government to give greater consideration
to the promotion of competition in banking. (Paragraph 37)

The Government is committed to promoting competition
in banking and, earlier this year, accepted the recommendations
of the Independent Commission on Banking (ICB). The recommendations
included ensuring that banks will no longer receive a competitive
advantage by being "too big to fail" and delivering
a strong and effective challenger bank from the Lloyds divestiture
to exert real, competitive pressure on the big banks. The Government
also strongly supports the ICB recommendation that a new redirection
service should be set up to make the process of switching current
accounts easier. The Government is holding the industry to account
against their commitment to deliver this service by the deadline
of September 2013. The Government also welcomed the ICB recommendations
on transparency. The Financial Services Authority (and the future
Financial Conduct Authority (FCA)) and the Office of Fair Trading
should continue to build on their work to improve transparency
in the banking market. Finally, the Government agrees that the
FCA has a key role to play in promoting effective competition
in financial services markets. This is reflected in the FCA's
objectives which now include an operational objective to promote
effective competition in the interests of consumers.

7. SMEs face serious and often insurmountable
problems in obtaining bank lending at reasonable rates. Non-bank
lending could be a solution for some SMEs, although the market
for such loans seems relatively unresponsive to apparent demand.
The Breedon review suggests that there are problems both with
supply and demand for non-bank financing, including a lack of
knowledge amongst SMEs about available sources of such financing.
The Government's efforts to examine non-bank channels for funding
businesses are very welcome, but we note there is much work still
to be done to establish large scale alternatives to bank lending
for most SMEs. . We recommend that the Government continues to
pursue creative solutions, including those suggested by the Breedon
review, to increase the level and availability of nonbank funding,
and set out the results in detail in the Autumn Statement. (Paragraph
41)

In its response to the Breedon Review, the Government
committed to explore the potential for developing new sources
of lending to SMEs. For example, the Government welcomes and is
supporting the feasibility study into how aggregation models could
help SMEs access more institutional investment. The Government
recognises it may have a role to play in supporting the initial
development of such markets, for example through the BFP, though
it will be important to ensure that BFP investments are commercially
sustainable and require private investors to share in the risks
that taxpayers would potentially be exposed to. The Government
is also keen to examine the role of innovative solutions to help
SMEs raise working capital, such as supply chain finance. It is
exploring how to speed up payments to SMEs in its own supply chains
and whether the Government can use its purchasing power to encourage
greater use of supply chain finance for businesses.

8. While a nominal export target may be of some
use in concentrating minds within Government, GDP growth will
only benefit if the UK's net trade position improves as well,
and that will require imports to grow less quickly than exports.
We are therefore sceptical about the value of an export target
without examining the overall current balance and will further
examine this issue in our inquiry into global imbalances. (Paragraph
43)

As emphasised in Budget 2012, the Government is committed
to rebalancing the economy with increasing exports and investment.
The export ambition, to more than double annual UK exports to
£1 trillion by 2020, supports this objective.

Other things equal an increase in exports will improve
the net trade position and boost growth in GDP. An export ambition
can also help to slow growth in imports, which would also improve
the net trade position. A more competitive export sector will
not only increase exports, but will also increase its ability
to supply to the domestic market and hence reduce imports. So
import substitution would also improve net trade and support the
necessary rebalancing of the economy.

The export ambition is consistent with the objective
to improve net trade and strong export growth is typically associated
with a positive net trade contribution. For example, in 2011 the
value of exports increased by over 10 per cent. At the same time,
net trade contributed 1 percentage point of the total increase
in GDP of 0.7 per cent over the same period.

9. The powers of direction to be granted to the
statutory Financial Policy Committee of the Bank of England are
likely to have a significant impact on the economy when used,
and the possibility of their use will have to be taken into account
in the forecasts of the Office for Budget Responsibility. We recommend
that the FPC and the OBR work together as the macroprudential
tools are developed to ensure that they are adequately reflected
in the OBR's forecasts. We will inquire into the new macroprudential
tools. Among issues we will examine is whether they will be as
effective in ameliorating downturns, as well as limiting upswings,
in credit cycles. (Paragraph 46)

The Government welcomes the Committee's continued
interest in the Financial Policy Committee (FPC) and the macro-prudential
policy tools. As is currently the case with the Monetary Policy
Committee, the FPC's policy decisions will be transparently communicated
through appropriate channels, including through publication of
a record of its formal meetings and bi-annual Financial Stability
Reports. The Government understands that the OBR will consult
with the Bank of England on the appropriate way in which to
include the macro-prudential policy stance set by the FPC in the
OBR's forecasts. The OBR will also write to the Committee.

10. While the Government maintains the current
tight fiscal profile, monetary policy will remain the main tool
for stimulating demand in the economy. The Bank of England appears
confident of the efficacy of continued quantitative easing, and
the Governor urged patience. We note from the OBR forecasts that
despite its current extremely accommodative stance, monetary policy
alone will be unable to close the output gap over the forecast
horizon, with long term consequences for the recovery. Bearing
in mind the risks of unwinding, we will continue to monitor the
impact of loose monetary policy and the effectiveness of quantitative
easing in our hearings with the Monetary Policy Committee and
the Financial Policy Committee. We will also continue to explore
the effectiveness of loose monetary policy on the economic recovery.
(Paragraph 51)

Monetary policy has a critical role in supporting
the economy as the Government delivers on its commitment to necessary
fiscal consolidation. The first £200 billion of quantitative
easing is estimated to have increased real GDP by around 1½-2%,
equivalent to the impact of around a 150-300bps reduction in Bank
Rate (BoE 2011 Q3 Quarterly Bulletin). Monetary Policy Committee
members expect the second round of asset purchases to work broadly
in the same way as the first round.

11. Loose monetary policy, achieved through quantitative
easing and low interest rates, has redistributional effects, particularly
penalising savers, those with 'drawdown pensions' and those retiring
now. The Bank of England has argued that some of those effects
may be mitigated by the increase in asset prices stimulated by
quantitative easing. While the aggregate of savers and pensioners
may have received some benefit from higher asset prices, there
will be many individuals who will not have benefited. The Bank
of England, after, where appropriate, consultation with the Treasury,
should provide its estimate of the overall benefit and loss to
pensioners and savers from quantitative easing. It should, in
addition, estimate how that balance changes depending on when
an annuity was purchased, using the following three dates: immediately
before the start of the crisis five years ago; immediately after
the introduction of quantitative easing; and now. We further recommend
that the Bank of England, and particularly MPC members, improve
upon their efforts to explain the benefits of the current position
of monetary policy to those affected by the redistributive effects
of quantitative easing. (Paragraph 54)

The Government welcomes the response of the Committee.
The Bank has consulted with the Government about its plan to publish
a paper which discusses the range of distributional effects of
quantitative easing, and attempts to quantify the costs and benefits
for savers and pensioners.

12. We recommend that the Government consider
whether there are any measures that should be taken to mitigate
the redistributional effects of quantitative easing, and if appropriate
consult on them at the time of the Autumn Statement. (Paragraph
55)

The impact of quantitative easing on pensioners and
savers is complex, and is one of a number of potential factors
currently affecting the value of pensions and savings. The Bank
of England plans to publish analysis on the distributive impact
of quantitative easing on pensioners and savers. The Government
keeps policy under review, and will consider the Bank of England's
findings.

13. Witnesses have expressed reasonable differences
about the current mix of fiscal and monetary policy. There is
also some concern that monetary policy is reaching the end of
its effectiveness in accommodating the present tightness of fiscal
policy. We will continue to monitor the Government's and the Bank
of England's approach in this area. (Paragraph 59)

Fiscal consolidation is necessary to reduce risks
in the short-term, restore private-sector confidence and underpin
sustainable economic growth. The ongoing global economic uncertainty
in the wake of the financial crisis, including from ongoing sovereign
debt concerns, reinforces the case for ensuring that the public
sector finances are set on a sustainable path. The credibility
of the Government's fiscal plan allows the independent Monetary
Policy Committee (MPC) to keep Bank Rate lower than it would otherwise
have been and to deliver additional monetary stimulus through
quantitative easing.

14. The OBR relies heavily on the output gap in
order to assess whether the Government is on course to meet its
fiscal mandate. However, as an unobservable measure, the output
gap is prone to great uncertainty and frequent revision. There
is therefore a risk that there will be unwarranted changes in
fiscal policy as a result of reliance on it. We recommend that
the Treasury ask the OBR to evaluate other, supplementary, approaches.
(Paragraph 65)

The public finances

15. In the next spending review period the Government
will need, on current forecasts, to find significant further reductions
in expenditure. We look forward to the Chancellor's update in
the Autumn Statement. (Paragraph 74)

16. The OBR suggests that the Government is on
course to meet its fiscal mandate and supplementary target. There
is little margin for error. The achievement of the fiscal mandate
is dependent on measurement of the output gap. We have already
expressed our concerns about the output gap as a measure (See
para 65). (Paragraph 78)

The Government created the independent OBR to produce
an objective, transparent and impartial assessment of the public
finances. Consistent with this, the OBR is responsible for determining
the appropriate methodology for assessing the size of the output
gap. The fact that this important judgement is made by the OBR,
rather than the Government, is central to the independence and
credibility of the forecast.

The Government's fiscal strategy is underpinned by
clear targets that ensure the public finances are set on a sustainable
path. The Government has set a forward-looking fiscal mandate
to achieve cyclically-adjusted current balance by the end of the
rolling, five-year forecast period, supported by a supplementary
target for debt that requires public sector net debt as a percentage
of GDP to be falling at a fixed date of 2015-16.

The fiscal mandate is based on a cyclically-adjusted
aggregate, to allow some flexibility at times of economic uncertainty.
As a result, it requires an estimation of the level of the output
gap. The Government recognises that estimating the output gap,
the difference between the actual level and the potential level
of output, is difficult. The level of potential output cannot
be directly observed, even retrospectively, and moreover estimates
of actual output are subject to revision. Accepting that there
is a degree of uncertainty around the size of the output gap,
it still remains important for policy decisions to be informed
by an estimate of the structural position. The OBR will also write
to the Committee.

Principles of tax policy

17. We note the welcome given by the Director
of the Office of Tax Simplification. Personal tax statements have
the potential to provide some additional transparency for taxpayers.
They should explain what they pay in tax and how it is spent.
They will need fairly to describe Government spending. We recommend
that the Treasury consult the OBR on their design. (Paragraph
84)

The Government welcomes the response from the Director
of the Office of Tax Simplification on the introduction of personal
tax statements. The Government is committed to improving the transparency
of the personal tax system so that individual taxpayers know how
much tax they are paying and how Government spends it.

The tax statements will be designed to ensure that
it is clear, accessible and transparent. As part of this process,
the Government is keen to get views from all stakeholders ahead
of their introduction in the 2014-15 tax year.

The statement will illustrate how a taxpayer's income
tax and National Insurance contributions help fund public spending
and will be based on information already in the public domain.
The latest comprehensive information on public spending by function
can be found at http://www.hm-treasury.gov.uk/d/pesa_2011_tables_chapter5.xlsx

18. We recommend that the Government clarify what
retrospection is proposed with regard to stamp duty. (Paragraph
86)

The Chancellor made it clear at the Budget that the
Government will not tolerate any further attempted Stamp Duty
Land Tax (SDLT) abuse stating that "... If you buy a property
in Britain that is used for residential purposes, then we will
expect stamp duty to be paid."

The announcement to take retrospective action where
appropriate re-enforced this message. Decisions on when retrospective
action will be taken will be made on a case by case basis.

The specific measures announced at Budget to address
SDLT avoidance (i.e. the introduction of a 15% rate and to address
a subsales avoidance scheme), were not introduced retrospectively
and applied from Budget day.

19. We recommend that the Government restrict
its use of retrospective legislation to wholly exceptional circumstances,
which should be narrow and clearly-defined. The Treasury should
set these out as soon as possible for consultation, along with
an explanation of how gradual further extension of retrospection
can be prevented. Any future retrospective tax measure must be
justified against the agreed criteria: such justification must
include clear explanatory statements to Parliament by the responsible
Minister and should invite views from relevant professional bodies.
(Paragraph 89)

The Government agrees that changes to tax legislation
where the change is to have effect from a date earlier than the
date of announcement should be restricted to wholly exceptional
circumstances. The Government has made a commitment to this effect
in the Protocol on unscheduled announcements, published in Tackling
tax avoidance at Budget 2011.

By observing the Protocol, the Government aims to
strike the right balance between the rights of taxpayers affected
by the change and the interests of the generality of taxpayers.
In doing so we ensure that our response to avoidance risk is proportionate
and limited to what is necessary to address that risk. The Forum
of Tax Professionals review announcements as a standing agenda
item at its regular meetings and provide Ministers with a view
on how the Protocol is being observed in practice.

The Government's announcement of retrospective legislation
on 27 February 2012 was an appropriate and proportionate response
to an aggressive tax avoidance scheme. Previous ministerial announcements
made it clear that the Government's policy and intention in introducing
the legislation was that the profits in question were intended
to be taxed; and the bank had signed up to the Code of Practice
on Taxation for Banks, under which it agrees not to involve itself
in this sort of aggressive avoidance.

Taxation

20. The cost and benefits of reducing the additional
tax rate to 45p are both highly uncertain, and could be significantly
more or less than the cost included in the Budget. We recommend
that HMRC publish in due course a comprehensive assessment of
the effect on the Exchequer of the new 45p rate. (Paragraph 97)

HMRC's document published alongside the Budget set
out in some detail the modelling behind the conclusions reached.
It measured the forestalling impacts, which were factored into
costings in the Budget. It also gave a full explanation of the
modelling underpinning the tax income elasticity and considered
the dynamic second round effects. As set out alongside Budget
2012 in the TIIN and Costing note, HMRC and HM Treasury will continue
to monitor the evidence around the yield from additional
rate of income tax in line with other relevant tax and benefit
changes.

21. The introduction of dynamic scoring could
have a significant impact on tax policy decisions and we will
monitor its progress. (Paragraph 98)

As the Chancellor stated in his evidence, the Treasury
continues to develop the sophistication of its costings to better
capture behavioural responses. Working with the OBR, who are responsible
for making judgements about the impact of policy changes on the
forecast , we will be looking to ensure that wider economic impacts
of large fiscal policy changes are actively considered.

22. The Red Book conflates the revenue impact
of the increased personal allowance and the reduction in the higher
rate threshold. We recommend that, as a matter of principle, the
Government set out separately in future Red Books the revenue
effect of each tax decision. (Paragraph 108)

The Government is committed to transparency on policy
costings, and since the June Budget 2010 has provided detailed
information on each policy costing in documents published alongside
the Budget, including most recently Budget 2012 policy costings.
Where more than one tax change is part of the same policy decision,
as is the case with the changes to both the personal allowance
and higher rate threshold, they are shown as a single policy costing,
in line with the methodology set out in Budget 2011 policy
costings. HMRC also publish Ready Reckoners[1]
to give an indication of the revenue impact of individual tax
changes.

23. We recognise that the Government needs to
take difficult decisions to tackle the budget deficit. Nonetheless,
the Government's latest proposals for reform of Child Benefit
solve only one of the two main problems identified with its original
policy. They add further complexity. We will review the effect
of the changes on HMRC, where further staff reductions are being
implemented, in our regular hearings with it. (Paragraph 115)

The Government aims to withdraw Child Benefit from
those on high incomes, whilst leaving the majority of claimants
unaffected. This will be done by applying a tax charge to taxpayers
who are in a household receiving Child Benefit and have an income
of over £50,000. Alternatively, if the charge was based on
household income, a new means test would need to be introduced
to assess the incomes of everyone in each of the 8 million households
receiving Child Benefit.

The Government believes that the proposed policy
is not more complicated than that alternative. A much smaller
number of people will have to go into the Self Assessment process
as a result of the Budget announcement than would be subject to
any new household income assessment. 85% of families will be completely
unaffected by the changes and those with a high income can choose
not to receive Child Benefit payments, which means that they do
not have to pay the tax charge at all.

24. We recommend that, where changes to complex
areas of taxation are proposed, the greatest possible supporting
material be published to allow for greater scrutiny of the possibility
of unintended consequences. (Paragraph 116)

The Government is committed to improving the way
that all tax policy is developed, communicated and legislated.

As set out in the June 2010 document Tax policy
making: a new approach, the Government undertakes a five-stage
process in developing tax policy. This includes allowing time
for consideration of a policy as well as draft legislation being
published at least three months before the finance bill. This
provides for greater consultation with and understanding by taxpayers
and representative bodies. For Finance Bill 2012, 75 per cent
of measures were announced at Budget 2011, 17 formal consultations
were held over summer 2011 on policy design, 400 pages of draft
legislation were published in December 2011 for technical consultation
and the Government received over 450 responses.

In addition, the Government produces TIINs, which
set out the aims and impact of each tax measure. TIINs are published
when a policy is finalised, with the vast majority included as
part of either the Overview to Legislation in Draft document,
published alongside the draft legislation, or the Overview of
Tax Legislation and Rates document published alongside the Budget.

Improvements to the development of tax policy making
have been welcomed by all the main representative bodies, and
by the independent Tax Professionals Forum, which is tasked with
assessing how well the Government complies with the new process.
The new approach has meant significantly greater transparency
about the impact of policies, with greater understanding of their
consequences. The Government remains committed to improving tax
policy further and will consult with interested parties where
appropriate.

25. We recommend that the Treasury soon ask HMRC
to make an assessment and publish the impact of the cap on income
tax reliefs, both on business investment and charities. A more
detailed explanation of the problem the cap seeks to address is
needed, along with consideration of other possible means of dealing
with it as the Red Book proposes. (Paragraph 120)

Budget 2012 announced the introduction of a limit
on all uncapped income tax reliefs of either 25% of an individual's
income, or £50,000, whichever is higher. Everyone should
pay their fair share.

When he announced a cap on unlimited income tax reliefs
at the Budget, the Chancellor said the Government would consult
on this and was very clear that he did not want this to impact
significantly on charities. Since that announcement the Government
has been engaging with charities and philanthropists to better
understand the likely impact of the policy, and how best to mitigate
this. These discussions have shown that there is real anxiety
in the sector that there will be an impact on large donations
and large donors. The Government has therefore decided to implement
the cap on income tax reliefs without including charitable reliefs.

Legislation will be published for consultation in
the autumn as part of the draft Finance Bill. At this point the
Government will publish a full tax impact assessment, in line
with the tax policy-making process.

26. The reduction in the headline rate of corporation
tax is intended to send a positive signal about the United Kingdom
as a place to do business and is forecast somewhat to encourage
investment. We note, however, that other measures, such as the
reduction in the capital allowance rate, may mean that the immediate
benefit of the corporation tax cut is only felt by a subset of
businesses in the United Kingdom. We recommend that the Government
monitor, and report on, the impact of the reduction in corporation
tax on businesses of all sizes. (Paragraph 124)

The Government welcomes the Committee's comments.
The reduction in the headline rate announced in the Budget will
benefit all companies with profits above £300,000. Companies
with profits below this level already pay corporation tax at the
rate of 20% and the Government has introduced a number of wider
reforms to simplify the tax system, improve tax reliefs and incentives
for growth, provide better access to finance and reduce the burden
of regulation which will benefit small business.

The changes to capital allowances announced at Budget
2010, formed part of a wider package of reforms to the corporate
tax system, and contributed to financing the reductions in the
main rate of corporation tax and small profits rate announced
at the same time. Over 95% of businesses are expected to be unaffected
by the changes to the capital allowances as their qualifying capital
expenditure will be fully covered by the new annual investment
allowance level of £25,000. Qualifying expenditure over this
limit will continue to receive tax relief through writing-down
allowances, which remain broadly aligned with rates of economic
depreciation.

Reductions in corporation tax will reduce the cost
of capital faced by business, which will help encourage investment.
The OBR assess that the additional 1 % reduction announced in
the Budget will increase the level of business investment by around
1% by the end of the forecast period. This is equivalent to an
increase in the total amount of business investment of £3.4
billion over the next five years.

The Government will monitor and assess the main rate
reduction alongside other measures in the Government's package
of corporation tax changes.

The supply side

27. The Committee welcomes the Government's inclusion
of supply-side measures in the Budget and recommends a greater
focus on supply-side reform. As a priority the Government should
set out in the Autumn Statement areas of progress in implementing
its agenda and more detailed benchmarks for further reform than
we have hitherto seen. (Paragraph 138)

The Government welcomes the Committee's positive
response to the continued focus on supply-side reform. Alongside
sustained deficit reduction and monetary activism, these reforms
are a key part of the Government's aims of achieving strong, sustainable
and balanced growth that is more evenly shared across the country
and between industries, as set out in the Plan for Growth, Autumn
Statement 2011, National Infrastructure Plan and Budget 2012.
Implementation of these reforms is a priority across Government,
and progress will continue to be monitored through departmental
business plans and implementation updates, the most recent of
which was published alongside Budget 2012.

Leaks and advance briefing

28. Appropriate pre-Budget consultation on specific
measures, especially in the tax field, is to be welcomed. It is
possible that there may also be cases where the Treasury judges
it necessary to canvass views about a measure intended for the
Budget which has not been out put out for consultation. Information
about such measures should be publicly released by the Treasury
in the normal way and, as appropriate, accompanied by a written
or oral parliamentary Statement. (Paragraph 149)

29. Coalition government is not a justification
for Budget leaks. We recommend that the Government review its
practices, based on the experience of this Budget, for preserving
Budget confidentiality in a coalition context. (Paragraph 151)

No Treasury officials, Treasury Ministers or Treasury
special advisers briefed the media before Budget day about any
of the most important policy announcements: which in this case
means policy information regarding tax rates or tax allowances.

The considerable media speculation in the week before
the Budget can be explained by two factors. First, the need to
agree major Budget measures over a week in advance in order to
allow the OBR to certify policy costings. Second, the fact that
the Budget policy package needs to be agreed by ministers from
both political parties forming the coalition. These factors mean
that, compared to previous governments, there are many more people
who know the content of the Budget some time in advance. Additionally,
the publication of the Coalition's Programme for Government also
means that priorities are spelt out more clearly and therefore
media speculation can always be better informed. It is difficult
to changes Budget confidentiality practices without altering these
two fundamental features of the Coalition Government's policy
framework. HMT will keep all procedures under review in order
to minimise the risk of leaks.